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Sorrell caught in Italian opera

Martin Sorrell and a formerly trusted lieutenant, Marco Benatti, are facing off in an ad-world drama that one executive described as "a Shakespearean story involving power, women and money."

As with several of the bard's best-known tales, this one is set in Italy and against a backdrop of testing times for the WPP Group empire over which Sir Martin presides. At the heart of the story: Mr. Sorrell's decision to dismiss Mr. Benatti, who ran WPP's Italian operations, and launch an investigation into the company's finances in the region; and Mr. Benatti's public assertion that the dispute has more to do with his falling out with Daniela Weber, his No. 2 in Italy, with whom he feels Mr. Sorrell is siding.

Mr. Sorrell flew to Milan on Jan. 9 to personally terminate Mr. Benatti's long-time relationship with the company. WPP hasn't said directly or publicly exactly why he was dismissed. But the story that is emerging from its side is that the action was taken after disagreements arose over the amount of money owed Mr. Benatti for an earn-out payment last year regarding Media Club, an Italian media shop purchased by WPP in 2002.

Mr. Benatti, whose responsibilities included spotting acquisitions for Mr. Sorrell, allegedly asked for $10.7 million. WPP put the amount owed as $362,000. The difference led WPP to investigate further, and, allegedly, to the discovery that Mr. Benatti held an ownership stake in Media Club.

Since the termination, WPP has appointed three law firms, accountancy firm Deloitte and a security company, Kroll, to examine the activities of WPP's Italian operations, which, apparently coincidentally, have been subject to two break-ins since these events started to unravel. The investigation focuses on three areas: non-disclosure of ownership of assets; tax issues related to offshore accounts; and potentially establishing companies that would compete with WPP.

Mr. Benatti seems befuddled by his dismissal. "I still don't understand the reasons for the termination ... beyond the vague and unfounded allegations in the press," he told Advertising Age in a written interview. Mr. Benatti denied that he asked for earn-out payments regarding Media Club, although he said he did receive an initial commission payment for bringing Media Club to WPP's attention.

Relationship questions

"I believe the reason for my dismissal is the deterioration of my working relationship with Daniela Weber," said Mr. Benatti. Ms. Weber, the chief operating officer of WPP Italy, was Mr. Benatti's longtime lieutenant. She joined WPP at Mr. Benatti's request several years ago. Recently, Mr. Benatti said, "There's been increasing disagreement between Ms. Weber and myself over the leadership of WPP in Italy as well as the criteria for entrepreneurial management." In his opinion, Mr. Sorrell resolved the issue by terminating his employment.

Some, including the European press and a number of ad executives, have claimed that Mr. Sorrell has, or had, a personal relationship with Ms. Weber. Neither responded to questions about the nature of their relationship and a WPP spokesman called the question, "irrelevant," adding that "the point is that on Jan. 9, Mr. Sorrell took decisive action."

Nevertheless, the matter has thrust Mr. Sorrell-no stranger to media coverage-into a bright, and from some angles, unflattering light. It has generated press attention in Europe that has spilled over into questions about other business practices at WPP. It has also prompted observers to wonder how a situation like the one unraveling in Italy could have come to pass without the knowledge of Mr. Sorrell, who is renowned in the ad business for his grasp of financial minutiae regarding companies he owns.

It is also a distraction that Mr. Sorrell could do without. While WPP as a whole continues to perform well, its ad agencies face a number of issues as they try to evolve to remain relevant in a less TV-centric marketing world. Y&R, in North America, in particular, has been a weak spot for the holding company. JWT is on a publicly-declared mission to reinvent its offering, while fortress Ogilvy doesn't look quite as impenetrable as it once did (just this week it lost Miller Lite to Crispin Porter & Bogusky.)

In addition, at least according to a handful of rival executives and the U.K. press, some outside directors are getting restless about WPP's succession plans.

This was flatly denied by Philip Lader, non-executive chairman of WPP's board. He said succession is a priority for the board and "we have a meticulous and rigorous planning process. I feel strongly that this is appropriately a confidential process but it is thorough, rigorous and current."